Margin loans decline on tighter credit policy

Credit segments utilised at securities companies for margin lending will be more tightly controlled next year, while total margin loans at securities companies currently stand at a relatively low level. Credit is currently poured into the securities sector mainly through two channels – the loans that securities companies take from banks for margin lending and loans that single investors borrow directly from banks. Margin trading refers to the practice of investors borrowing money from brokerage companies to purchase securities worth more than the investors’ net asset value in their accounts. It is considered a financial leverage tool as it allows investors to buy more stock than they would be able to normally. But investors wishing to use margin trading have to deposit at brokers to form the collateral for their loans. According to statistics from the State Securities Commission (SSC), credit poured into the securities sector remains at a very low level. Credit that banks use to finance securities companies for margin lending is currently estimated at about VND21 trillion to VND22 trillion. Meanwhile, the amount borrowed by individual investors to trade stocks is estimated at about VND1 trillion. “Both numbers are too small because the total credit poured into the two channels accounts for only about 0.3 per cent of total outstanding loans of the commercial banking system,” an SSC official whose name was not disclosed told online newspaper vneconomy.vn. During the ongoing sixth session of the 14th National Assembly held in Ha Noi on October 29, Governor of… [Read full story]